Amazon, DHL will begin major new logistics industry partnership in May at CVG

March 20, 2017

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By Greg Paeth

Even before online retailing behemoth Amazon builds its first Prime Air shipping hub at the Cincinnati-Northern Kentucky International Airport, it will begin an unprecedented collaboration with its future across-the-street neighbor, German logistics and shipping company DHL, which operates one of its three global air freight hubs at CVG.

It is a major strategic partnership between two of the world’s largest logistics operations.

Beginning in May, DHL will continue to run its Americas Hub at CVG at night while Amazon uses the facility and equipment during the day in what is thought to be Amazon’s first step in designing and building its own Prime Air hub at the airport, according to three well-positioned business sources familiar with airport operations.

Seattle-based Amazon, the world’s largest online retailer, declined to say anything about its plans at the airport beyond what it revealed in a Jan. 31 press release about its plans for a $1.5 billion Prime Air hub likely to create as many as 2,700 jobs, according to estimates by the state.

DHL acknowledges it will be working with Amazon, but declined to provide any details.

“DHL can confirm that it has been contracted to provide a range of services to Amazon at the DHL Cincinnati Hub, including sorting operations and ground handling for the Amazon air network. We look forward to providing further support to this global customer,” Bea Garcia, media relations director for the Americas, said in an e-mail.

The German shipping giant routinely loads and unloads 50 cargo planes from outside of the U.S. each night, said Candace McGraw, CEO of the airport. She does not know if DHL and Amazon will be working together on international shipments, she said.

A number of professionals who collect data about Amazon or the air cargo industry have speculated that the company may use the Cincinnati-Northern Kentucky airport as its hub for international shipping.

Brain Clancy, managing director of Logistics Capital & Strategy in Washington, D.C., didn’t go that far with his comments. But Reuters quoted him as saying that the DHL-Amazon proximity in Cincinnati might lead to some cooperation on international shipments. He could not be reached for further comment.

“In the interim, while they’re (Amazon) building that hub, they’re going to hire DHL to start work now,” said one of the business sources who didn’t want to be identified because the two shipping companies are reluctant to say much about the project. “In May, they’re going to have jets here and they’re going to be using the DHL facility during the daytime… DHL will still do their night-time work, but Amazon will use that (facility) during the daytime… So that’s why DHL is having a big hiring surge right now for a daytime shift.”

Amazon announced in late January that it would invest $1.5 billion in a 3 million-s.f. building and state-of-the-art equipment in a massive hub that would serve millions of Amazon Prime customers in the U.S.

The hub is one of the biggest economic development projects ever announced for Northern Kentucky and the state.

“It is certainly the largest project in Northern Kentucky Tri-ED’s 30-year history in terms of total capital investment announced with $1.49B and second largest in terms of total new employees announced at 2,700 employees,” said Dan Tobergte, president and CEO of Northern Kentucky Tri-ED, and Kate Ferrer, director of marketing and projects for Tri-ED, which worked on an inducements package on behalf of the airport and the state. “The second largest project to this one would have been the Delta Air Lines announcement for its CVG hub expansion in 1990 with $375M in capital improvements and 2,800 employees.”

The presumption had been that Amazon wouldn’t be in position to begin hub operations until its building was up and running at the Hebron, Ky., airport, which would not be for another year or two.

But the explosively growing Amazon, which has been operating a small air hub in Wilmington, Ohio, apparently decided it wants to launch operations in Northern Kentucky long before a building could be constructed. Wilmington is about 65 miles from the Northern Kentucky airport.

Airport CEO McGraw said the company has not informed the airport about when it will begin construction on a 400-acre tract that is part of 900 acres the company leased from the airport earlier this year. The 400 acres are immediately across Wendell Ford Boulevard from the DHL Americas Hub, which serves North and South America and the Caribbean.

DHL, based in Bonn, operates in 220 countries and has 340,000 employees, including 2,400 at the Cincinnati-Northern Kentucky airport hub.

Earlier this year the company announced that it would hire an additional 900 employees. One of the people who knows about the DHL-Amazon project but did not want to speak for attribution said some of the 900 employees will be brought on board because of DHL’s growth. Others will be hired to handle packages for Amazon.

DHL held a job fair in March near the airport in an effort to fill some of the jobs.

The company cut the ribbon on its Americas Hub in June of 2013, when DHL said the event signaled the completion of a four-year, $105 million expansion that included construction of an 180,000-s.f. sorting facility designed to handle larger express shipments.

At the time of the ribbon-cutting ceremony, DHL said the new hub “sits at the heart of the DHL U.S. network with flights connecting customers from over 220 countries and territories worldwide to every corner of the U.S. In addition to global hubs in Hong Kong and (Leipzig) Germany, the CVG hub completes the backbone of the DHL intercontinental network.”

“Our investments in the DHL CVG hub enable us to respond more quickly and effectively to the growing international activity we see, especially among small and mid-size businesses,” Stephen Fenwick, CEO of DHL Express Americas, said at the time. “DHL aims to be an invaluable resource this important business segment can depend on to expand and grow in an increasingly global environment.”

In its “Global Powers of Retailing” report for this year, the consulting firm Deloitte ranked Amazon as the tenth largest retailer in the world based on revenues reported for the 2015 fiscal year, when Amazon reported sales of $79.2 billion. Deloitte’s report, which ranks the 250 largest retailers in the world, said Amazon ranked 186th when it was first listed in the “Global Powers” report in 2000.

For calendar year 2016, Amazon reported revenues of $136 billion and fourth quarter revenue of $43.7 billion, slightly more than twice Kentucky’s $21.5 billion budget for the two-year period that ends June 30, 2018.